Notes on the Front

Here’s a thought courtesy of Cllr. Eric Byrne – a suggestion so common-sensical its’ frightening.  Immediately after Bernard McNamara did a runner on the PPPs in Dublin city, Cllr. Byrne proposed that the City Council scrap all such ‘partnership’ proposals and do the following:

Dublin City Council already owns the sites in question. The Council should now proceed with the regeneration projects proposed, setting aside one-third for social housing and one-third for affordable housing, with the remaining third to be sold to owner-occupiers on the open market. The sale of one third of the units on the open market would allow the Council to recoup much of the cost entailed. In order to finance the up-front expenditure, the National Pension Reserve Fund could make available the capital funding. This would be repaid in full, plus interest, over an extended period of time. This would mean that funding would not need to come from the Exchequer. All the Government would have to do is make the necessary legislative changes.

Well, why not?  This solves a lot of problems at one stroke – construction workers are put back on site, slowing unemployment; some of the 100,000 people on housing waiting lists get a home; people who can’t afford one on the open market get an opportunity to buy; and the open housing market gets a boost.  In addition, the cost of providing social and affordable homes is considerably reduced, offset against the profits of the open market houses.

Here’s another consideration: quality.  Local authorities, having learned their lessons from those past disasters such as the Ballymun towers or Fatima, now plan and build houses that far surpass those in the private sector.  If you don’t believe me, go down to the south inner city and have a look at Robert Emmet Close and go across the street and inspect the the boxes that pass for private apartments.  A new city council development just down the road from me is even having solar panels installed.

And what a boon to the Exchequer it would be.  Here’s a back-of-the-envelope calculation.  An average skilled operative earns about €920 a week.  S/he will pay the Exchequer nearly €185 per week in income tax.  This doesn’t count PRSI, nor does it count VAT/excise, nor does it count the multiplier effect (the income that other people earn from this skilled operative’s spending – shops, restaurants, airlines, etc.).  But it costs the state €197 when that person is unemployed.  The loss to the state, therefore, is €382 per week when a working builder is laid off.  Actually its much more given all the items I didn’t include.  But let’s stay with this figure.

Putting 3,000 builders back to work via Cllr. Byrne’s plan (spread throughout the country) would earn the state over €1 million a week – and when all the multiplier effects are calculated, much more.

So cut government expenditure by cutting unemployment.  Of course, this is not a silver bullet, this is not the platform for future sustainable growth.  But it can lessen the impact of negative growth.  And in this case, keep some people at work and give people a home to live in.

That’s called thinking your way out of a recession.